Monday, May 13, 2013

The
Budget Control Act of 2011 (BCA) established new budget enforcement mechanisms
for reducing the federal deficit over the 10-year period FY2012-FY2021.
The BCA placed statutory limits, or caps, on discretionary spending for
each of those 10 fiscal years, which will save an estimated $0.9 trillion
during that period. In addition, it created a Joint Select Committee on Deficit
Reduction (Joint Committee) with instructions to develop legislation to reduce
the federal deficit by at least another $1.5 trillion through FY2021. In
the event that Congress and the President were unable to enact a Joint
Committee bill—as turned out to be the case—then automatic annual spending
reductions would be triggered beginning in FY2013 and extending through
FY2021. Under the BCA, the reductions will be achieved by a combination of sequestration
(i.e., an automatic across-the-board cancellation of budgetary resources) and, beginning
in FY2014, by lowering the discretionary spending caps. The President ordered
the FY2013 sequestration on March 1, 2013.

The potential impact of spending reductions triggered by the BCA on health
reform spending under the Patient Protection and Affordable Care Act (ACA)
appears to be somewhat limited. ACA sought to increase access to
affordable health insurance by expanding the Medicaid program and by
restructuring the private health insurance market. It set minimum standards for private
insurance coverage, created a mandate for most U.S. residents to obtain coverage,
and provided for the establishment by 2014 of state-based insurance
exchanges for the purchase of health insurance. Certain individuals and
families will be able to receive federal subsidies to reduce the cost of
purchasing coverage through the exchanges. The new law included direct spending
to subsidize the purchase of health insurance coverage through the exchanges,
as well as increased outlays for the Medicaid expansion. Under the rules
governing sequestration, all Medicaid spending and most of the spending on
subsidies is exempt from any reduction, and cuts to Medicare are capped at
2%.

ACA also included numerous mandatory appropriations that provide billions of
dollars to support temporary programs to increase coverage and funding for
targeted groups, provide funds to states to plan and establish exchanges,
and support many other research and demonstration programs and activities.
Generally, these appropriations are fully sequestrable. However, for any given fiscal
year in which sequestration is ordered, only new budget authority for that year
is reduced. Unobligated balances carried over from previous fiscal years
are exempt from sequestration.

ACA also is having an effect on discretionary spending, which is subject to the
annual appropriations process. The law reauthorized appropriations for
numerous existing discretionary grant programs authorized under the Public
Health Service Act, permanently reauthorized funding for the Indian Health
Service (IHS), and created a number of new grant programs and provided for
each an authorization of appropriations. In addition, the Congressional Budget
Office projected that both the Department of Health and Human Services and
the Internal Revenue Service will incur substantial administrative costs
to implement ACA’s policies and programs. ACA-related discretionary
spending generally is fully sequestrable.

Date of Report: May 1, 2013
Number of Pages: 25Order Number: R42051Price: $29.95

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